Over the past six months, Zoom has been a great trade, beating the S&P 500 by 10.4%. Its stock price has climbed to $109.49, representing a healthy 23.5% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Zoom, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Zoom Will Underperform?
We’re happy investors have made money, but we don’t have much confidence in Zoom. Here are three reasons why ZM doesn’t excite us, plus one stock we’d rather own.
1. Weak Billings Point to Soft Demand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Zoom’s billings came in at $1.31 billion in Q1, and over the last four quarters, its year-on-year growth averaged 4.8%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
2. Customer Churn Hurts Long-Term Outlook
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Zoom’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 99% in Q1. This means Zoom’s revenue would’ve decreased by 1% over the last 12 months if it didn’t win any new customers (remember that net revenue retention can be well over 100%).
Zoom has a weak net retention rate, signaling that some customers aren’t satisfied with its products, leading to lost contracts and revenue streams.
3. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Zoom’s revenue to rise by 4.2%, close to its 8.5% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.
Final Judgment
We see the value of companies addressing major business pain points, but in the case of Zoom, we’re out. With its shares outperforming the market lately, the stock trades at 6.1× forward price-to-sales (or $109.49 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Zoom
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
